A number of mechanical tests and metallographic techniques have been used to investigate the mechanism of ductile fracture of AA5754 sheet. The sequence of events in the development of shear localization is clarified using in situ strain mapping on both the sample surface and through thickness direction during tensile tests. It is observed that the failure mode changes from cup-cone type to shearing with increasing Fe content in both continuous cast (CC) and direct-chill cast (DC) AA5754 sheets. However, this transition happens in CC with much lower Fe content than DC. As very little damage is found near the fracture surface, this suggests that damage may be a consequence of the shear process rather than a trigger that determines material ductility. For both CC and DC with same Fe content of 0.21%, fracture strain of CC is much lower than DC. It is postulated that this is due to the differences of particle distribution in these two materials, especially the increased fraction of stringer type structures which exist in CC material.